Oil prices near six-month highs as stock markets retreat

Oil prices closed in on six-month highs yesterday amid supply concerns stoked by the United States tightening the screws on Iran.

Stock markets meanwhile mostly dropped, with European traders digesting news of the collapse of two mega-mergers in the supermarket and banking industries.

Wall Street meanwhile opened mixed amid a raft of US corporate giants releasing earnings reports, including positive news from Microsoft and Facebook.

“Brent crude oil has rallied above $75 a barrel for the first time this year on the back of tighter sanctions on Iran, while gains in West Texas Intermediate (WTI) have been curtailed by a surge in US supply,” noted Dean Popplewell, markets analyst at Oanda trading group.

Brent North Sea crude for delivery in June jumped to $75.60 per barrel, the highest level since the end of October, before falling back slightly. West Texas Intermediate (WTI) prices reached $66.28 per barrel before it dropped.

The US removal this week of waivers that allowed countries to buy oil from sanctions-hit Iran is expected to hit supplies, though analysts are keeping watch on the region and whether OPEC responds by opening up the taps.

Oil prices had already enjoyed a strong recovery this year, with output capped by Russia and the OPEC cartel as well as unrest in Venezuela and Libya.

In the stock markets, Asian equities stuttered after New York indices retreated Wednesday from record highs, with weak economic data around the world offsetting a forecast-beating earnings season.

While the mood on trading floors remains broadly positive after a blockbuster start to the year, there are lingering concerns that growth in most parts of the world is well off the pace of the US.

There was further negativity in Asia, with South Korea yesterday reporting its biggest quarterly contraction since late 2008. The 0.3 per cent drop was also its first fall since the last three months of 2017.

The data comes after investors have been on a buying spree for much of the year, fuelled by optimism that China and the US will hammer out a deal to end their trade war.

Shanghai was the main loser yesterday, ending down 2.4 per cent on concerns the Chinese government could ease up on a run of mini stimulus measures that have supported the economy and equities.

European stock markets were solidly down, with shares in Deutsche Bank flattened and Commerzbank dropping 2.7 per cent after Germany's two biggest lenders ended merger talks.

British supermarket Sainsbury's meanwhile slid 4.4 per cent after the UK's competition watchdog blocked its proposed merger with Walmart-owned Asda.

In foreign exchange news, the euro dropped to $1.1118, its lowest level since June 2017, before rebounding slightly.